A Tandem Bike for Local-State School Finance

In 2013-14, most California education-watchers expected two policy debates about school finance. They got one, about local control funding. But there should have been three. The state's work on education finance is not finished.

"Local Control" distribution of state funds (LCFF)

The first of the three debates was about how to inject a level of principle into the capricious way that state funds had been apportioned to school districts. Against most expectations, the legislature managed to pass the "Local Control Funding Formula" into law. (For more about the significance of this accomplishment, see Lesson 10.4 on "What Causes Change in Education"). Any change of this kind creates winners and losers, and Californians are not known for Vulcan dispassion. It was quite an accomplishment. It also isn't the end of the story.

Easier parcel taxes?

A second debate will almost certainly emerge, about whether to allow local school districts an easier way to raise local parcel taxes in support of local schools, or perhaps in support of local students. (The difference may seem subtle, but it means everything if your kids attend a charter school or if you want to enable partnerships that extend beyond traditional schools.) Prop. 13 closed the door on local use of property taxes based on assessed property value, but it left the door cracked open for other approaches. With a two-thirds vote, districts can levy local parcel taxes, which are based on the existence of a parcel rather than on its value. (A court ruling in Borikas v. Alameda Unified School District limits districts’ flexibility in creating parcel taxes.) Some of California’s wealthiest communities have been able to sustain strong participation in local public schools through successful local parcel tax campaigns that enable them to offer school programs capable of competing with private schools.

A lower passage threshold for parcel taxes would significantly expand the number of districts able to muster the political support to pass them. Repeated Sacramento rumblings seem to suggest that the debate will focus on whether to drop the passage threshold to 55%, mirroring the facilities bond threshold set by Prop. 39.

The idea of a lower parcel tax passage threshold has strong political appeal. Districts where poverty is low and students already speak English don't qualify for additional funds under LCFF, and they are stuck with California's skimpy funding. If the pass rate were lowered, parcel taxes would be easier and cheaper to pass. A lower pass rate for parcel taxes could make a real difference for these districts, as well as others that could muster the political will to act.

But there’s a problem.

On its own, the plan stinks

Lowering the pass threshold for parcel taxes, on its own, is a terrible idea. But it is halfway to a good one.

The core problem is that lowering the passage threshold for local parcel taxes disproportionately helps wealthy communities. It doesn’t help schools where local homeowners have little wealth to tax. This is a fatal flaw. If the plan does not provide a path to equitable funding, it’s not equitable policy. On its own, the 55% parcel tax plan would be a boon to high-wealth communities, but it would just re-create the inequalities that LCFF was designed to address. Sooner or later, courts would rightly throw it out.

There is an alternative.

The "Tandem Bike" approach

Here’s how it could work. The passage threshold for local taxation in support of schools would be lowered to 55%, the level set under Prop. 39 for school facilities bonds. In communities with a strong tax base per student in residence, that would be the end of it – the money raised locally would stay local, period. In districts with a weaker tax base per student, however, the state would have an obligation to match the local taxes raised. The point would be to enable all communities to take local action in support of funding their schools, and for that action to be meaningful.

Examples can help clarify the concept. The tax base per student in Fresno is much smaller than that in San Francisco. San Francisco enjoys a powerful local tax base, with high local wealth and relatively few students per taxpayer. Under the tandem bicycle plan, San Francisco would gain the capacity to pass local tax measures in support of education at a lower threshold, but it would receive no matching funds. Fresno, by contrast, has a relatively small tax base per student. Therefore, it would receive significant state matching funds. The point is to ensure that local funding capacity everywhere ends up equivalent to at least the state median. In the metaphor of the tandem bike, the local community would steer, and the state would help pedal.

Including a local role in the funding of schools would revitalize the relationship between schools and communities.

Show me a policy involving money, and I’ll show you a policy that someone thinks comes straight from the pit of hell. Some will object, rightly, that parcel taxes are a clumsy vehicle. Wouldn’t it be better, and more just, to base property taxes on property value rather than on property parcels? Yes, it would. Blame the voters of 1978 for foreclosing on that option. Perhaps a bold legislative leader, thinking through the 55 percent parcel tax idea, will choose to test the voltage level of the third rail, instead. Proposition 13 is overdue for a reconsideration to address its unintended consequences.

I’m often asked where the money to meet the state’s “tandem bike” matching fund obligations would come from. Here’s one possibility: Matching obligations would simply come off the top of the state’s general fund, as a payment commitment on par with bond debt, probably on a delayed basis to enable better planning. Then education funds would be allocated to students and their schools and districts according to the distribution rules of the Local Control Funding Formula. The 2008 report of the Education Excellence Committee includes an analysis of how a variable matching fund would work. Additional discussion can be found here.

Including a local role in the funding of schools would revitalize the relationship between schools and communities. This kind of high-engagement local dialogue has been substantially absent from California education for 30 years. Earnest, detailed local conversations about local innovation powered by local funding commitments could create new conditions for innovation in California education. It would create real reasons for district leaders and union leaders to work through their local differences and develop real consensus involving parent leaders and community members. It would bring meaning to "Local Accountability," a core assumption of the new local control accountability system. It would also restore meaning to local governance of schools. Taxpayers are far more comfortable with local leaders than with policymakers in distant Sacramento. And they are certainly more comfortable with paying taxes if they know the taxes will benefit their own community.

Local funding power varies greatly, and cannot, on its own, form the basis of an equitable system of funding for schools. State and local funding will work best in tandem.

Join the Discussion

Has your district passed a parcel tax? How many dollars per student does it generate? (Dollars per student is the most meaningful way to compare parcel taxes because districts vary in size.)

What percentage of votes in your district were in favor of the most recent tax measure? (Hint: ask your county's Registrar of Voters)

Note: Prior to passage of LCFF, a version of this post appeared on EdSource.org, where it received many useful comments

Questions & Comments

vpeterson_2001
April 28, 2015 at 8:20 pm

I am on our parcel tax over site committee. It was the largest parcel tax to date when it passed and people did not realize what they were getting into until their first bill arrived. It tends 12 million dollars a year and I fear when it ends in two years people will not approve or extend the funds!